It was the Best of Times, It was the Worst of Times: A Tale of Two Years in Crypto and Coin Offerings

For anyone invested in cryptocurrencies or considering a
capital raise funded through an Initial Coin Offering (ICO), it would be
difficult to imagine two more diametrically different years than 2017 and 2018.
As 2018 draws to a close, it is worth reflecting for a moment on all that has
happened over the past two years.

Bitcoin/Cryptocurrency

In January 2017, anyone who had even heard of Bitcoin could
purchase one for just under $1,000. The price remained in the vicinity of
$1,000 for a few months, but March 26, 2017 was the last day on which Bitcoin
closed at less than $1000. [1] On October 20, 2017, the price for the first
time closed above $6,000, and by December 17, 2017 Bitcoin hit its all-time
high and was trading at $20,000 per coin. Despite certain prognosticators
pegging Bitcoin’s potential at in excess of $100,000, profit taking—or perhaps
a “correction” of sorts—drove the price down to around $14,000 by the end of
2017. Even with this gut-wrenching drop of nearly one-third, 2017 was by all
accounts a banner year for Bitcoin, as anyone holding Bitcoin on January 1 and
December 31 saw the value of their investment increase 1300 percent in a single
year.

But the precipitous decline in Bitcoin’s value continued in
early 2018, and few would have predicted that all of 2017’s gains would
disappear by the end of the year. In mid-January the daily trading volume
reached the astronomical number of nearly four billion Bitcoins per day. Given
that less than 17 million Bitcoins even existed at that time, meant that nearly
one-quarter of all Bitcoins changed hands in a single day. By early
February, the price dropped to around $6,000 by early February. In a matter of
10 weeks, approximately $238 billion in Bitcoin-related wealth simply vanished.
As of December 18, 2018, Bitcoin was trading at $3,523.10 per coin, with few
indications it was heading for a significant increase in the near future.

2018 was also extremely volatile for other major
cryptocurrencies. Ripple, which was trading at $3.50 per coin in late December
2017, was worth about 37 cents per coin as of December 20, 2018. Ethereum
reached its peak of about $1,236 per coin on January 12, 2018, but had lost
more than 90 percent of its value by December 20, 2018, and traded at $105.50.

ICOs

As we have discussed extensively in prior blog posts and
articles, ICOs have been around for half a decade, but really picked up steam
in 2017. 2017 and the first half of 2018 will no doubt be viewed as the
pinnacle of the “Wild West” period of ICOs, when its seemed like anyone looking
to raise money—whether legitimately or not—was offering digital coins in
exchange for cash, and everyone looking to capitalize on the next Bitcoin boom
was more than willing to throw money at the venture. For reasons we have, again,
previously discussed at length, including a series of statements by the SEC,
significant regulatory actions, and a few high-profile civil and criminal cases
brought by the SEC and the CFTC, by the middle of 2018 the “gold rush” seemed
to be coming to an end.

Nevertheless, in 2018 ICOs raised more than $20 billion in
revenue.[2] By comparison, ICOs raised approximately $10
billion in revenue in 2017. It is worthy of note, however, that approximately
three-quarters of the money raised in 2018 was raised in the first half of the
year. While the number of ICOs occurring between July and December was not
dramatically lower than the number between January and June, the money raised
was 75 percent less.

What Comes Next?

So what will 2019 bring? With respect to the value of
Bitcoin and other cryptocurrencies, it has become clear that predictions amount
to little more than educated guesses. It certainly appears that those with a
bullish outlook are outnumbered by those taking a more cautious approach, many
of whom believe that the price will ultimately settle around $1,500—or right about
where it was before the 2017 boom. The future of ICOs is also complicated. There
is no question that the increased regulatory oversight, along with a better
educated pool of potential investors, will make it harder for the less
scrupulous players to get rich. However, those looking to raise money
legitimately who are willing to jump through the requisite procedural hurdles
and make the necessary disclosures may find willing investors who are eager to
put their money behind legitimate enterprises in their infancy.